Again, the remittances are lending support to the country’s external position as the trade deficit deteriorates. The support from remittances have been coming from a continuous elevated levels of over $2 billion since June 2020 – the last 15 consecutive months. It’s also the sixth consecutive month when inflows are recorded around $2.7 billion on average.
As per State Bank of Pakistan, remittances from abroad stood at $2.66 billion in August 2021, which was almost 27 percent year-on-year higher with a decade high growth rate for that month; whereas, the month-on-month inflows slipped by only 1.8 percent, which reflects the post-Eid slowdown. On the whole, remittances increased by 10.4 percent year-on-year in the first 2 months of FY22 (2MFY22).
Majority of the remittances - around 70 percent on average - come from 4 key destinations– Saudi Arabia, UAE, UK and the US, while another 20 percent is sourced from other GCC countries and the Europe. This trend has been holding up in Covid-19 pandemic. During the first two months of the fiscal year (2MFY22), where inflows from expats in Saudi Arabia slipped by 5.6 percent year-on-year, remittance flows from US and the Europe depicted growth of 31 and 50 percent respectively.
Rise in remittances have been due to constant efforts of the central bank and PRI. From reducing the TT charges to the use of formal channels; from incentive schemes to orderly foreign exchange market conditions; all have contributed to the rise in remittances. With flight operations and travel also resuming gradually and no visible decline in remittances (due to hawala/hundi) also shows the formalization efforts of the authorities. At the same time, the external factors like economic activity resuming in host countries as vaccinations drive gather pace have also been contributing to the ability of the overseas workers to send back money home.